Society has fed you the lie that if you do well in school and have good grades, you will get a great job. Maybe even have enough money to retire early and enjoy your old days. But this is a rare case.
Retire during a recession. How?
The first thing you need to do is to get rid of the idea that retirement is only for old people. It is simply a scenario when you have enough money to do it. If you succeed in doing it you will have the freedom to do whatever you want and whenever you want.
Many of us have the desire to retire early and live the rest of our lives in comfort and nobody telling us what to do or not to do.
House prices have gone up to 48% in the last 10 years, the stock market is the most expensive it’s ever been, and on top of that, we are on a brink of a recession. This all leads to the rich getting richer and the poor getting poorer.
Retirement is a lot like climbing Everest. It is a hard challenge, and sadly most people don’t make it to the top. However, the best ones that have a chance are the ones who train hard. This article can help you in the form of financial literacy and it’s the key to closing the wealth gap.
Four levels of early retirement
Early retirement is possible if you have the knowledge to secure your freedom. There are four levels of retirement, depending on your goals and aspirations. It is important to know what you want to achieve before doing it.
Here you can find how to achieve each one in today’s economic climate.
Level one – Drifting
Before this level, you are not financially independent. This is the bare minimum, but there is no shame if this is your goal. To achieve this level you need enough money for your living expenses and leftover to meet debt payments. Also, you need to have an emergency fund for at least 3-6 months to cover your expenses.
Level two – Stability
Basically drifting, but with Captain America protecting your financial interests. By reaching this level you are better than most common people. You have your own house and you are stable financially.
But the problem is that at this level your salary isn’t increasing enough to cover for the increased inflation. So this can drag you to level one, drifting.
The thing you need to do is find a hobby for additional income. A combination of hobby and business is a great way to secure your investments and retirement plans. To achieve this level you need to focus on three things:
- Paying off high-interest rate
- Investing into the markets – Roth IRA in America and ISA in the UK is a great way for doing it. They will allow your money to grow over time completely tax-free
- Recognize your existing skills and stack them accordingly in order to create an additional source of income
Level three – Freedom
There is a very clear way to know when you have reached this level. It is called the 4% rule. When you are in this stage you don’t do day-to-day work. You are paid based on your value and not by the hour.
At this level, you have already invested 25 times your desired annual salary, which means you should have an endless pot of money if you only withdraw 4% per year. This is known as the freedom figure, but it is different for everyone.
Level four – Abundance
This is the absolute summit of the retirement mountain. Some people achieve this goal at the age of 65, while others do it in their early 30s. This is very the party is and where you want to be. You have achieved abundance when you have enough money to do what you want.
It is important not to forget where you came from and help others to climb the mountain with you.
This is a stage that usually people only dream of getting. At this level, you have enough money to turn down an investment opportunity you are not interested in. In order to achieve this level, you need to combine all the previous levels.
That means that you started with a 9 to 5 job, then build up investments, build a business, and finally expanded into multiple different business and investment assets. Also, you are able to adapt to disruption for over three decades.
Don’t forget when in this stage to help other generations join you at the top.